Template-Type: ReDIF-Paper 1.0
Author-Name: Mikhail Chernov
Author-X-Name-First: Mikhail 
Author-X-Name-Last: Chernov
Author-Name: Drew Creal
Author-X-Name-First: Drew 
Author-X-Name-Last: Creal
Author-Name: Peter Hördahl
Author-X-Name-First: Peter 
Author-X-Name-Last: Hördahl
Title: Sovereign credit and exchange rate risks: evidence from Asia-Pacific local currency bonds
Abstract: We study the dynamic properties of sovereign bonds in emerging market economies and their associated risk premiums. We focus on the properties of credit spreads, exchange rates, and their interaction. Relying on the term structure of local currency bonds issued by Asia-Pacific sovereigns, we find that local variables are significant in the dynamics of currency and credit risk, and the components of bond risk premiums reflecting these risks. Local currency bonds dramatically improve the investment frontier.
Length: 60 pages
Creation-Date: 2021-01
File-URL: https://www.bis.org/publ/work918.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work918.htm
File-Format: text/html
Number: 918
Keywords: emerging bond markets, credit risk, currency risk, Twin Ds, affine model
Classification-JEL: F31, G12, G15
Handle: RePEc:bis:biswps:918